Sunday, December 19, 2010

Defining Corporate Social Performance.

As the year comes to an end much has been written about corporate social responsibility, with many organisations adding socially responsible statements to their websites and mission statements. Some organisations have even established ‘high level’ positions, accountable for developing their socially responsible ‘footprint’ and then a few, a very few, have truly integrated corporate social responsibility into their organisational strategy and culture; and are year on year making a real difference. But how many organisations are actually measuring their contribution to social responsibility?

The essence of corporate social responsibility isn’t about the talk or the plans, but the continuous improvements generated through corporate actions, where corporate social responsibility is defined as actions and activities that improve and/or protect social welfare on a local or global level; and where corporate social performance is the ‘measurement’ of the organisations overall performance in improving and protecting social welfare compared to their leading competitors in the industry, measured over a period of time, (Luo and Bhattacharya, 2009, p. 201)

In their 2009 article Luo and Bhattacharya take the time to explain the difference between corporate social responsibility and corporate social performance, where “corporate social responsibility initiatives are related to but different from corporate social performance in several aspects;

First, the former refers to firms’ programs and investments in responsibility and/or sustainability, while the latter represents stakeholders’ assessment of the overall quality of those programs and investments (McWilliams and Siegel 2000).

Second, the former captures the noncumulative, one-time involvement in corporate pro-social behaviours, while the latter can be a proxy for a firm’s cumulative, historical involvement in these behaviours (Barnett 2007, p. 797).

Third, the former is a non-competition based construct, while the latter is relative to the competition in the industry. While firms invest in corporate social responsibility initiatives; corporate social performance, as the measure of firms’ aggregated historical social performance relative to competition, is what stakeholders reward the firms for and, therefore, what is potentially linked to firm financial performance”, (p.201).

Organisations need to take the next step in 2011 and not just make statements about what they’re doing and how much they are investing in social responsibility projects, but actually show how they are performing year on year. In this way, social responsibility performance can become a meaningful measurement of organisational performance and continuous improvement along with the other core performance metrics.

It’s no good organisations ‘promising’ social responsibility initiatives that aren’t congruent to their own business success, just to get on the social responsibility band-wagon, as this will only be a recipe for disaster. In fact Luo and Bhattacharya highlight that “too often, executives pursue a corporate social responsibility agenda without prudently considering broader contexts of the firm. Disconnected responsibility initiatives not in synergy with firms’ marketing strategy instruments can obscure many opportunities for companies to benefit society and can even lead to more harmful, unintended stock risk (good intentions end up with bad numbers; Porter and Kramer 2006)”, (p.210).

Organisations need to spend the time integrating corporate social responsibility into their formal strategic development processes – identifying the opportunities, the strategic options and the long-term benefits for their social focus and their organisational growth. As part of their long-term focus corporate social performance needs to become a key business indicator, not just for the strategic leadership but, for their stakeholders and their customers as well; as it won’t be long until both investors and customers are asking organisations to prove their achievements, in a meaningful, quantified and sustained way.

Finally, Luo and Bhattacharya “urge firms to conduct rigorous research to determine stakeholder perceptions of firm actions and more precisely map how corporate social performance and firm strategic levers interact and align before settling on the appropriate corporate social responsibility initiatives. In doing so, managers may build a more resilient firm that can leapfrog the competition and better ride out economic downturns”, (p.211).


Luo, X. and Bhattacharya, C.B. (2009). The Debate over Doing Good: Corporate Social Performance, Strategic Marketing Levers, and Firm-Idiosyncratic Risk. Journal of Marketing; Vol. 73, Issue 6, p.198-213.

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